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In a recent decision, the English High Court has held that the terms of a litigation funding agreement were protected by legal advice privilege, such that they were not capable of being disclosed to the opposing party. Bearing in mind the sharp increase in litigation funding in recent years, the decision will be welcomed by legal finance users and provides additional reassurance that the terms of their funding agreements (including the amount sought, and the funder’s identity) will remain out of the public domain and out of their opponents’ grasp.

Legal advice privilege is the rule that communications between a lawyer and a client are confidential, such that they cannot be disclosed to any party without the permission of the client.

The principle, first cited in the 16th century case of Berd v Lovelace [1577] Cary 62, originated as protection for individuals when gaining access to the legal knowledge available to a lawyer and was said to stem from the "oath and honour" of the lawyer, an unwritten contractual relationship of sorts. It was based on the fact that the ordinary man could not adequately navigate the complexities of the law and justice system without some assistance. However, without protection, it was thought that the quality of the advice provided by the lawyer would suffer as clients would be discouraged from making full disclosure to their legal representatives, for fear that the same would become known to the opposing party.

Naturally, matters have moved on in the 500 years since Berd v Lovelace, and the law on legal advice privilege has been refined and honed to deal with new challenges presented by societal, technological and economic developments.

In 2003, in Three Rivers No 5 [2003] QB 1556, the English High Court extended the scope of legal advice privilege significant to include material which “evidences” the substance of communications, which are themselves subject to legal privilege.

The scope of legal privilege has been expanded further by the recent case of In the Matter of Edwardian Group Limited [2017] EWHC 2805 (Ch), which concerned an application for the disclosure of a party’s litigation funding agreement. The English High Court in that case held that documents which give an opponent “a clue to the advice given” by the legal representative or “betrays the trend of the advice being given” are also now protected by legal advice privilege.

This, however, is not a blanket protection. Legal advice privilege will apply only where there is “definite and reasonable foundation in the contents of the document for the suggested inference”. Conversely, privilege will not apply merely on the basis that there is “something which would allow one to wonder or speculate” as to whether legal advice has been obtained and as to its substance.

In a landscape in which litigation finance is becoming more and more common, this momentous decision will provide substantial comfort to those who avail themselves to litigation funding and allow the industry to continue to grow, thus providing access to justice to those who may not otherwise have the resources to fund costly litigation themselves.